In a candid admission that the Punjab & Maharashtra Cooperative (PMC) Bank had taken it for a ride, the Reserve Bank of India (RBI) on Tuesday informed the Bombay High Court that the PMC Bank had submitted “fraudulently manipulated data” to it for sample checks.
In a detailed affidavit filed before a HC bench of Justices Satyranjan Dharmadhikari and Riyaz Chagla, the RBI stated: “Since transaction testing is not done in the RBI inspection, and the bank submitted fraudulently manipulated data to RBI for sample checks, the sample of accounts picked for inspection did not contain undisclosed HDIL related accounts. The disclosed HDIL related accounts were seen and majority of them were assessed as NPAs”
In an affidavit filed before the high court, Rajlaxmi Sethi, Assistant General Manager, Department of Co-operative Bank Supervision, RBI, stated: “Further, non-monitoring of end use of funds despite instructions to this effect contained in the Master Circulars on Advances and conflict of interest of Shri Waryam Singh as Chairman of PMC bank and as a former director of HDIL group was also commented upon in the report along with the attempt by the bank to show disclosed accounts of HDIL group as standard by sanction of new loans to close/regularise the old NPA accounts in non-adherence to RBI Master Circular (MC) dated July 1, 2015 on lRAC norms”.
“The bank had also sanctioned mortgage overdraft limits to a wholly owned group company of HDIL while the present Chairman (then director) of the bank was one of the Directors in the company. This was a violation of para 5.1 of the then RBI Master Circulars on Board of Directors dated July 1, 2010 and July 2, 20l2,” the RBI stated, in its inspection report that has been made part of its affidavit filed before the high court.
“Waryam Singh chaired the Board meeting to ratify the approval of the mortgage overdraft, in which he was directly interested in non adherence to para 2.3 (b) (iii) of RBI Master Circular on Board of Directors - UCBs, requiring non-participation by the Directors concerned Board discussion, if a proposal in which they are directly' or indirectly interested, comes up for discussion/to disclose their interest, well in advance, to the Board of the bank,” the affidavit stated.
“The Inspection team had also established the relationship between the Chairman of the bank and HDIL promoters, which might have acted as the primary consideration for sanction of credit facilities and resulted in their utilisation to payoff one-time settlement dues with other lenders,” the affidavit stated.
The high court is hearing a PIL seeking the removal of restrictions on the withdrawal amount from PMC Bank came up for hearing. The HC bench heard the matter and scheduled the next hearing of the case for December 4.
The RBI’s affidavit before the high court should be seen in the context of a finding during the ongoing investigations that the PMC Bank’s exposure to the HDIL group was nearly 73 per cent of its total loan book size of Rs 8,880 crore as of September 19, 2019.
The Economic Offence Wing (EOW) of the Mumbai police, which is investigating the case, suspects a nexus between some of the accused and realty group HDIL, whose mammoth loan defaults are said to have caused a liquidity crisis at the bank, leading to appointment of administrator and restrictions on withdrawal of funds.
HDIL is a listed real estate company, has played a key role in the PMC Bank scam. The Mumbai police have registered a case against the former bank management and promoters of the HDIL in the PMC Bank scam case. The bank's former chairman Waryam Singh, managing director Joy Thomas and other senior officials, along with the directors of HDIL Sarang Wadhwan and Rakesh Wadhawan, have been named in the FIR. HDIL's promoters had allegedly colluded with the bank management, to draw loans from the bank's Bhandup branch.
During the course of the investigations, it has come to light that the PMC Bank created more than 21,000 fake accounts to hide the various loans. In a “confession” made to the RBI through a letter, PMC Bank’s suspended Managing Director Joy Thomas had earlier admitted to have given loans to HDIL and its related entity to the tune of Rs 6,500 crore without informing all the board members.
Meanwhile, earlier in the morning, the depositors of BMC Bank staged a protest against Reserve Bank of India outside the premises of Bombay High Court, seeking the removal of restrictions on the withdrawal amount from PMC Bank.
Among other things, RBI counsel Venkatesh Dhond told the high court court that depositors could approach RBI administrator for withdrawal up to Rs 1 lakh in case of medical emergencies.
The police had deployed heavy bandobast outside the high court. The depositors’ protest went on for two hours.